Dillard's, Inc. (NYSE:DDS), is not the largest company out there, but it received a lot of attention from a substantial price increase on the NYSE over the last few months. As a well-established company, which tends to be well-covered by analysts, you could assume any recent changes in the company’s outlook is already priced into the stock. But what if there is still an opportunity to buy? Let’s examine Dillard's’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.
What's the opportunity in Dillard's?
The stock seems fairly valued at the moment according to my valuation model. It’s trading around 10.60% above my intrinsic value, which means if you buy Dillard's today, you’d be paying a relatively reasonable price for it. And if you believe the company’s true value is $113.34, then there isn’t really any room for the share price grow beyond what it’s currently trading. Furthermore, Dillard's’s low beta implies that the stock is less volatile than the wider market.
What kind of growth will Dillard's generate?NYSE:DDS Earnings and Revenue Growth May 15th 2021
Future outlook is an important aspect when you’re looking at buying a stock, especially if you are an investor looking for growth in your portfolio. Although value investors would argue that it’s the intrinsic value relative to the price that matter the most, a more compelling investment thesis would be high growth potential at a cheap price. However, with an extremely negative double-digit change in profit expected next year, near-term growth is certainly not a driver of a buy decision. It seems like high uncertainty is on the cards for Dillard's, at least in the near future.
What this means for you:
Are you a shareholder? DDS seems fairly priced right now, but given the uncertainty from negative returns in the future, this could be the right time to reduce the risk in your portfolio. Is your current exposure to the stock optimal for your total portfolio? And is the opportunity cost of holding a negative-outlook stock too high? Before you make a decision on the stock, take a look at whether its fundamentals have changed.
Are you a potential investor? If you’ve been keeping tabs on DDS for a while, now may not be the most advantageous time to buy, given it is trading around its fair value. The stock appears to be trading at fair value, which means there’s less benefit from mispricing. In addition to this, the negative growth outlook increases the risk of holding the stock. However, there are also other important factors we haven’t considered today, which can help gel your views on DDS should the price fluctuate below its true value.
So if you'd like to dive deeper into this stock, it's crucial to consider any risks it's facing. Our analysis shows 3 warning signs for Dillard's (1 is a bit concerning!) and we strongly recommend you look at them before investing.
If you are no longer interested in Dillard's, you can use our free platform to see our list of over 50 other stocks with a high growth potential.
This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
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